1. February 10, 2012 Michelle Hemerley Director, Compliance Consulting

2. Introduction and Overview
Board Reporting
Best Practices Report Format
Scorecard
Board Training
Various Methods of Training
Topics to Include
Recent FinCEN information
The new Consumer Financial Protection Bureau

3. Best Practices – At least Quarterly BSA Report
Board Reporting
At least Annually
Effectiveness of the BSA/AML Program
Approve Policy and Risk Assessment
Best Practices – At least Quarterly BSA Report
Program, Policy, Risk Assessment update
Examination and Audit update
SAR Reporting
Number and Dollar Amounts
General Summary of Suspicious Activity
Any issues with SAR Reporting

4. BSA/AML Board Report
Scorecard Example

5. Additional Scorecard Items
BSA/AML Report
Additional Scorecard Items
Monetary Instruments purchased with cash greater than $3,000
High-Risk customer numbers and percentages
OFAC matches
314(a) matches
Accounts opened / Loans Closed

6. Additional BSA/AML Report Items
High-Risk Customer information
Reviews and Monitoring information
Visits to High-Risk Customers
BSA/AML Training Conducted

7. Annual BSA/AML Training
Board Training
Types of Training
Computer Based
In-Person
Documentation
Annual BSA/AML Training
Initial
Refresher/Risk Based/Recent Enforcement Actions

8. What is Money Laundering?
Annual Board Training
What is Money Laundering?
Placement – Introduce unlawful proceeds into the banking system without attracting attention
Layering – Moving funds around to create confusion and complicate the paper trail
Integration – Ultimate goal to create the appearance of legality
Terrorist Financing

9. BSA/AML & OFAC Requirements
Currency Transaction Report (CTR)
Purpose is to create a “paper trail” for transactions (deposit, withdrawal, etc.) conducted with cash
Required to complete a CTR for all cash transactions over $10,000
Monetary Instrument Log
Purpose is to create a “paper trail” for monetary instruments (cashier’s checks, money orders, traveler’s checks, etc.) purchased with cash
Required to maintain a record of all monetary instruments purchased with cash between $3,000 and $10,000

10. BSA/AML & OFAC Requirements
Suspicious Activity Report (SAR)
Purpose is to assist in combating terrorist financing, money laundering, and other financial crimes.
Required to identify, research and report suspicious activity
Office of Foreign Asset Control (OFAC)
The office that administers and enforces economic and trade sanctions against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to weapons of mass destruction.
Prohibited from opening an account or conducting a transaction with anyone on the OFAC list.

11. Role of Board of Directors
Establish culture of compliance - set the tone
Approve BSA/AML Compliance Program and appoint BSA/AML Officer
Provide direction and support to management
Discuss BSA/AML significant concerns
Maintain knowledge of BSA/AML requirements
Ensure necessary corrective action is taken

12. Role of Senior Management
Manage the enterprise-wide BSA/AML program
Report Quarterly to Board of Directors
Establish a structure to identify, monitor and manage BSA/AML risk for the Bank
Clearly assign responsibility and accountability
Provide appropriate resources
Integrate BSA/AML compliance objectives into management goals

13. Key Components of BSA/AML Program
BSA/AML Compliance Program Requirements:
Internal controls – policies, procedures, and processes to control risks and achieve compliance
Independent testing
Designated BSA/AML personnel
Training
Board of Directors Oversight
Customer Identification Program (CIP)

14. Key Components (Cont’d)
Risk assessment
Customer & Enhanced Eue diligence
Suspicious activity detection, monitoring and reporting
OFAC
USA PATRIOT Act - section 314 (a) and (b)
Information and communication

15. BSA/AML Compliance Program
BSA/AML Officer – Michelle Hemerley
Assistant BSA Officers
BSA/AML Department
High Risk Account Specialist
FinCEN 314 & OFAC Compliance Officer
Independent Audit completed by X

16. Customer Identification Program
Most Important Key – Know Your Customers
Required to Verify the Customer’s Identity and obtain required documentation (Name, Address, DOB, SS#)
Run against X list

17. Initial Customer Due Diligence
Identification
Proof of Business
Anticipated Activity & Returns
Google
Enhanced Due Diligence
Contact customer to discuss business
Visits
Monitoring

18. Money Laundering Red Flags
Customers Who Provide Insufficient or Suspicious Information
Activity Inconsistent with the Customer’s Business
Other Suspicious Activity (I.e., wire transfers, increase in activity or returns)
Employee Activity

19. High-Risk Customers
Cash Intensive Businesses
International Businesses/PEPs
Third Party Processors
Outbound Telemarketing
Debt Consolidation
Privately Owned ATMs

20. Money Service Business
High-Risk Customers
Money Service Business
A Business that conducts more than $1,000 in business with one person in one or more transactions on the same day in one or more of the following services:
Money orders, Traveler’s checks and Stored Value / Prepaid Access Cards
Check cashing / Payday Lending
Currency dealing and exchange OR
Providing money transfer service IN ANY AMOUNT

21. Remote Deposit Capture (RDC) Remotely Created Checks (RCC)
Product Information
Remote Deposit Capture (RDC)
Scan checks and transmit images
Remotely Created Checks (RCC)
Check authorized by customer remotely via phone or on-line without signature
Automated Clearing House (ACH)
Network for electronic alternative to paper checks – governed by NACHA rules
Third Party Payment Processor
Provide payment processing to merchants and other business entities

22. Identifying Suspicious Activity
Risk analyzed at initial account opening
Risk score based on:
Type of business and volume of activity
Geographic location
Average Ticket
Previous Returns
Customers are monitored by the BSA/AML Department accordingly

23. Identifying Suspicious Activity
BSA/AML Department Monitoring
MSB Monitoring – Structuring, commercial check cashing, microstructuring as well as site visits and annual reviews
Cash Vault Monitoring – Monthly review of cash withdrawal fluctuations
Remote Deposit Capture Monitoring – Daily, monthly and periodic reviews of variances, returns, and unusual trends or activity
ACH Monitoring - Monthly review of activity variances and analysis of returns

24. Reporting Suspicious Activity
If suspicious activity is noted, complete Unusual Activity Form and send to BSA/AML Department immediately
Be sure to explain “Who”, “What”, “When”, “Where”, “How” and “Why” you are suspicious
Keep CONFIDENTIAL – never discuss with anyone

25. Refresher/Risk Based Training
Recommend still cover BSA/AML requirements and Board responsibilities
Bank’s specific BSA/AML Risks according to Risk Assessment
Recent Examination Findings and Enforcement Actions
Latest Money Laundering Schemes
Check Fraud
Mortgage & R/E Fraud
Illegal Aliens
Internet Gambling
Human Trafficking

26. Recent FinCEN Information
Sign up for FinCEN s / AMLA membership
Law Enforcement Case Examples
FinCEN Requires AML Program and SAR Filing for Non-Bank Mortgage Lenders and Originators
FinCEN Extends Deadline for Adopting New CTR and SAR

27. The New Consumer Financial Protection Bureau (CFPB)
CFPB Authority
Bank’s over $10 Billion and Non-Bank Financial Institutions
Consumer Complaints
Various Consumer Regulations – not BSA/AML
New Examinations
Product Life Cycle
Consumer Perspective
UDAAP and Fair Lending

28. Final BSA/AML Comments & Questions